Do You Have to Claim a Stimulus Check on Your Taxes?
Understand how stimulus payments interact with your tax return. Get clear guidance on reporting these funds and claiming any related credits.
Many taxpayers received Economic Impact Payments, often called stimulus checks, during the COVID-19 pandemic. A common question is how these payments interact with annual tax filings. Understanding this relationship, especially concerning the 2021 payments, helps ensure accurate tax reporting.
Are Stimulus Checks Taxable?
Economic Impact Payments (EIPs) distributed in 2021, specifically the third round, are not considered taxable income. These funds do not increase your gross income or subject you to federal income tax, so do not include the amount of a stimulus check when calculating your taxable income.
These payments were advance distributions of a tax credit, sent before you filed your tax return for the applicable year. This design provided immediate financial relief without creating a new tax liability. Receiving a stimulus payment will not reduce your refund or increase the tax you owe.
Understanding the Recovery Rebate Credit
The Recovery Rebate Credit (RRC) is a refundable tax credit claimed on a federal income tax return. Its purpose is to reconcile any difference between the Economic Impact Payment amount a taxpayer was eligible to receive and the amount they actually received. This credit is the mechanism through which stimulus payments interact with your tax return.
You might need to claim the Recovery Rebate Credit if you did not receive the full amount of the third Economic Impact Payment you were entitled to. This could happen if your income decreased in 2021 compared to the year the IRS used to determine your advance payment, or if you added a new qualifying dependent, such as a child born in 2021.
Claiming the Recovery Rebate Credit
To claim the Recovery Rebate Credit for the third Economic Impact Payment, you must file a 2021 federal income tax return, even if you are not typically required to file. IRS Letter 6475, titled “Your Third Economic Impact Payment,” is a document for this process. This letter, sent by the IRS in early 2022, provides the total amount of the third Economic Impact Payment and any “plus-up” payments you received for tax year 2021.
Use the amount from Letter 6475 to accurately calculate your credit and avoid processing delays. If you did not receive Letter 6475 or the information appears incorrect, access your IRS online account to view your Economic Impact Payment amounts. For married individuals filing jointly, each spouse receives their own letter showing half of the total payment; both should check their individual online accounts.
The Recovery Rebate Credit is claimed on Schedule 3, Line 30 of your 2021 Form 1040 or Form 1040-SR. Determine the amount you were eligible for based on your 2021 tax information and subtract any amount you already received. The IRS will not calculate the credit if you enter $0 or leave the line blank.